1. Media Markets & Economics
Media & Society Lecture Notes

2. Media Corporations
MAIN POINT: The media industry is dominated by a handful of giant corporations
They want and need to make a profit. This has a tremendous impact on the shape of the industry (what we might call structural dimensions) as well as media content (TV shows, films, pop music, etc.)

3. Corporations vs. Individuals
Different relationships between:
Legality
Debt/Assets
Taxes
Licensing
Contractual agreements
Liability – this one is particularly important

4. For-Profit vs. Non-Profit Corporations
Nonprofits:
Operations are run by an elected or self-appointed board that makes decisions
They make money, but that money is reinvested in the activities of the non-profit.
For-Profits:
Operations are run by executives, as well as boards. Major difference from non-profits = shareholders.
They make money and the profit is dispersed in the form of dividends (to shareholders) and bonuses (to executives)

5. C.R.E.A.M. (Like the Wu-Tang Song)
The media industry is not a public service like roads, lighthouses, or the government in general.
The goal is to make money.
This seems logical because we live in a capitalist world, but its actually kind of weird because media are not just like ‘any other product’. Most significantly, media (especially journalism) has historically been seen as a vital component to a functioning democracy.

6. The Big Media Corporation: Economic Motivations
Shareholder Profits
The index of the % of a given market that a corporation controls.
Indicates how a corporation is doing in comparison to its competition.
Net Profit
The actual money made.
Future Profitability
Expected revenues based on current projections.

7. How To Maximize Profits
1. Destroy or contain competition – media corps. can operate at a loss for a while to drive out smaller companies.
EFFICIENCY – streamlining, assembly-line rationale, cutting out labor intensive jobs. Ex. Disney pioneering animation cells. Also see Taylorism.
PRICE OF PRODUCT – set to meet shareholder expectations rather than conditions of a given market.
“Although the giants (Borders and Barnes & Noble) did not create this system, they are themselves the biggest problem with it, for it is they who have done the most to wreck the trade. From their book units, they expect profits way too steep for publishing, which never yielded high returns” – Mark Crispin Miller

8. How To Maximize Profits
2. Minimize Production Costs
ECONOMIES OF SCALE – the more of single unit you produce the cheaper each unit will be (ex. CDs)
FLEXIBLE PRODUCTION – contracting out stages of the production process that are not owned by the company.
This is the opposite of Fordism.
EXPORTING INFLEXIBLE PRODUCTION – moving the entire production process to where it will be cheaper to operate (i.e. where labor is cheaper, laws are made to benefit foreign companies)

9. How To Maximize Profits
3. Diversification – producing different products and entering new & different markets.
These practices give a company more chances to accrue profits and write-off losses.
4. Maximizing Sales – sell, sell, sell
MULTIPLE MARKETS WITH MINIMAL RETOOLING (ex. action movies translate to global markets)
SYNERGY – when one product is marketed across many media contexts.
Also known as cross-promotion. Ex. Warner Brothers cross-promoting it’s own films & soundtracks.
Media corporations love synergy because 1) it is cheap and easy, ) one product or trademark promotes all the others.

10. McChesney – The Market Über Alles
He begins by questioning the idea that markets “give people what they want” and he asks whether our media system is actually a competitive or free market.
Free Market – the idea that everyone in a market starts at a level playing field with no external restraints on competition. It assumes that:
the market functions in terms of natural laws of supply and demand
everyone starts at a level playing field
there should be no external restraints on competition (especially from the government)
This sounds well and good, BUT…

11. McChesney – The Market Über Alles
The media industry in the U.S. is an oligopoly, which means that just a few firms dominate everything.
An oligopoly differs from a monopoly, which is when one company controls market for a certain product.
In the 19th Century monopolies were common w/ Rockefeller, Carnegie, etc.
Ex. AT&T had a monopoly on the phone system until the 1980s.
We have anti-trust laws to break up monopolies.
For ex. Microsoft faced charges in 1998 and 1999 for monopolistic business practices.
An oligopoly also differs from a market with Limited Competition, where there are many producers and sellers but only a few differentiable products within a particular category.
Ex. Radio formats (not many, very predictable)

17. EXAMPLE OF CONGLOMERATION

18. McChesney – The Market Über Alles
Our media industry is not a free market.
Why?
Because all of the following trends allow a very small number of media corporations to dominate the media industries:
Horizontal integration
Vertical integration
Consolidation / Concentration (shown in the images above)
Conglomeration (shown in the images above)
Control of distribution networks
Synergy

19. Synergy
Synergy is cross-promotion (Warner Movies cross promoting Warner Music)
TYPES OF SYNERGY
Product Placement – promotion of a product within a movie, TV show, song, or some other media text.
Media Text Within A Media Text – similar to product placement but recognition of the layers of text.
Ex. Magazine ads for TV shows.
Celebrity Endorsements – appeals to star quality.

20. McChesney – The Market Über Alles
The result? McChesney argues that the current trends in our media system are:
Bad for democracy
Bad for diverse content
Bad for diverse ownership
Leave us with a “Forced Choice”